SINGAPORE, Nov 11 — All the factors were in place for a stock rally yesterday and regional markets initially obliged with gusto, until doubts set in later in the day.
The key driver came in the form of a weak dollar and Wall Street’s overnight rally, which saw the Dow Jones Industrial Average rise 203.52 points, or 2.03 per cent, to 10,226.94 – its highest level since October last year.
Equities also benefited from the weakening dollar, which fell to a 15-month low against the euro in early morning trade as investors moved into riskier assets.
But the euphoria was short-lived, thanks partly to a slight recovery in the greenback in the afternoon that helped snuff out optimism.
The Straits Times Index (STI) hit 2,726.9 at one point but fell below 2,700 at another, before eking out its third day of gains, propped up by banking stocks.
It closed 14.22 points, or 0.53 per cent, higher at 2,707.60, its highest close since Oct 26.
Equities have been edging higher since last Friday, when the US Federal Reserve indicated interest rates will remain near zero in the near term.
Hong Kong’s Hang Seng Index, which hit a two-week high in mid-day trading yesterday, also stumbled and closed just 0.27 per cent higher. Tokyo’s Nikkei Average was up 0.63 per cent, while Taiwan’s Taiex was up 0.75 per cent.
In Singapore, 1.42 billion shares worth S$1.45 billion (RM3.5 billion) were traded.
Banks rose, fuelled by optimism over rosy third-quarter earnings. United Overseas Bank rose 40 cents to a year’s high of S$18.40, while DBS added 22 cents to S$13.94. OCBC gained seven cents to S$7.97.
Daiwa upgraded the banking sector to “positive” from “negative” while UBS upgraded earnings estimates.
Investors also snapped up Noble Group and SingTel, both of which will announce results today.
Noble Group rose six cents to S$2.80 with 30.16 million shares traded, while SingTel added three cents to S$2.94 with 26.04 million shares traded.
Straits Asia Resources rose two cents to S$1.95 with 21.03 million shares done.
Analyst Ho Choon Seng of CIMB-GK Research, which rated the stock “outperform”, said strong earnings growth from rising coal production and firm prices is expected.
DBS Vickers said that weakness in the US dollar and carry trades ‘fanned equity and commodity markets higher’, adding that the STI had trended lower as investors took profits.
In US dollar carry trades, investors sell the low-yielding greenback and buy riskier assets with higher yield.
Phillips Securities analyst Phua Ming-weii said: “Sentiment seems to lean strongly towards caution rather than optimism with ‘sell on strength’ being the general mindset at this point in time.
“This type of sentiment also tends to lead to short-term trading and quick profit-taking.” — The Straits Times
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